Perspectives - Ontario

While Ontario is a thriving market for wine, the government-owned Liquor Control Board of Ontario (LCBO) has a monopoly on sales. James Lawrence spoke to exporters about what it takes to be successful in this market.

Adam Williams, Adam Rogers, João Roquette
Adam Williams, Adam Rogers, João Roquette

Miguel Roquette

export manager
Quinta do Crasto, Portugal

Quinta do Crasto entered the Ontario market in 1999. The attraction for us as a company was obvious – the alcohol market is largely controlled by one state-run organisation, the LCBO, known as the biggest wine buyer in the world. The potential for imported wine is therefore huge and the overall consumption of wine continues to grow at a healthy rate. Moreover, the LCBO pays on time and you can potentially sell a large volume, if your brands are well received. Yet there are major disadvantages inherent to working with the LCBO – they have too much power and dictate the rules; if you want to export to this market then a great deal of flexibility is required. In addition, the rules specify that you cannot deal with the LCBO directly; you have to hire an agent, which raises the cost of doing business in Ontario. For example, private orders can be placed by your agent but always on consignment. Your order is only paid in full when the last bottle is depleted from the warehouse. Other disadvantages include the strict rules concerning case markings, bottle labelling and the fact that you must pay commission to your agent whether you sell to the monopoly or on-trade. This is far from a straightforward arena. There is a growing political movement to break the LCBO’s monopoly over the retailing of alcohol, but I believe it will never happen. There’s simply far too much money and power involved.

Indeed, complex and contradictory are the two words that define the Ontario market for imported wine. On the one hand, if you win a tender and your wine is ordered and performs really well, then sales should increase in the short term as long as you invest. But entering this market is no guarantee of continuity; there are far too many producers competing. Things can get political with the monopoly and you must invest to get results. Some wines sell out in a matter of days and the next order is only placed within a year. Geographically, Toronto almost totally dominates the consumption of imported wine, a city of more than 6m people. Direct sales are also growing in importance; however, the on-trade is a difficult sector to crack, requiring a very good agent to secure listings. Some restaurants, for example, will only buy wines that are not available in the monopoly shops. Consumers are generally open-minded and eager to try a range of wine styles. Be patient and invest wisely in the development of your brand. Make sure your agent does their job and is not there only to get commissions. Lastly, make sure to keep your wine scores updated at all times, as consumers follow critical and peer reviews with great interest.

 

Adam Williams

sales director
Hush Heath Estate, England

Hush Heath is a newcomer to Ontario – we started exporting in 2016. Our Balfour 1503 Rosé was the first English wine available in Canada, which was a great boon for us as a company. In recent times, I have noticed a surge of interest in English sparkling, as our inaugural listing has led the way for more English brands to enter the market. However, this is a complex market and a great deal of work and patience is required in dealing with the monopoly retailer, the LCBO. This ensures that new products enter the market at quite a slow rate and it’s difficult to respond to demands quickly. Our first shipment sold out in one day, and the LCBO were unable to reorder until the following tender process a year later. But the key advantage is that once you’re in the LCBO, you are assured that your brands will have excellent availability. Moreover, Canadian consumers are very quick to embrace new wine styles, so in that sense Ontario isn’t a traditional market at all. 

 

The IWSR perspective
Adam Rogers

research director, North America 

The Canadian wine market continued its growth in 2017. Higher-than-average pricing along with an above-potential economy drove consumers to cross categories. Imported still wine was the main driver of growth, led by France, Italy and New Zealand. Local producers also registered notable growth due to a renaissance of wine growing in Canada, specialising in growing premium vinifera and French hybrid grapes. Previous interest in US blended wine has tapered off and volume was relatively flat in 2017 versus 2016. The retail landscape is still evolving, as some sales are shifting to the private sector, although pricing and inventory are still under control of the monopoly. Canada remains an attractive market for exporters due to higher pricing when compared globally. Italian and Spanish red wine saw notable growth in 2017, as did French and New Zealand white wine.

Imported Prosecco and imported rosé were the main drivers of [sparkling] growth, accounting for nearly three-quarters of the volume growth. Ruffino Prosecco (C$16.75 or C$12.78 RRP) nearly doubled in size. The Champagne market did not match its double-digit growth from 2016, but still had a good year. The Champagne market is still relatively small compared to other developed sparkling wine markets, but growing at an impressive rate.

 

Olivier Rivain

sales director
Joseph Mellot, France

Joseph Mellot has been active in the Ontario market since the 1980s. I feel that the market is growing at a reasonable rate, albeit it’s growing a little slower than anticipated. The reasons for this include a return to spirits and cocktails; the 30-something generation is a throwback to their parents. Craft beer is also highly important, as is craft cider. And, of course, the legalisation of marijuana will significantly affect this market in the coming years. Nevertheless, Ontario is Canada’s biggest province and Toronto is a fantastic place/market to see your wines in. The most significant market growth is in retail, while the online channel has exploded in recent times. New Zealand is currently a hot category, as is the Rhône. E-commerce is in its infancy but is moving fast. Meanwhile, I would say that the Baby Boomers are drinking less, but remain the key audience for European wine styles, especially French. The most impressive growth I’ve observed is in the Italian category. However, I would say that the overall level of wine knowledge is low. European expats continue to drive sales of European wines in Ontario. 

Overall, this is a good market in which to do business. The product selection is better than in most private markets; niche brands can do very well in Ontario. In addition, Toronto’s dominance of the market is slowly waning as we’re seeing a large shift in population to smaller regional towns. That being said, remember that working with an organisation like the LCBO is expensive – funding the marketing programmes, etc. The LCBO selection process, costs and system of rebates and quotas takes a lot of patience to navigate. So I implore any brand to seek out a good and experienced agent.

 

João Roquette

export manager
Quinta do Vallado, Portugal

We initially entered the Ontario market in 2005; the LCBO is the biggest purchaser of wine in the world, and has been the biggest buyer of Portuguese wines in the past. Ontario also has a very big Portuguese community which gives us extra potential. However, overall growth has been reasonable but very unstable for single producers – you are either in or out. Particularly in the Portuguese wine category, we’ve observed a move towards bigger-volume and lower-priced wines/brands in the last few years. This is a challenging market; the off-trade is completely controlled by the LCBO, so we have little or no control over this growth, even though this is the bulk of business. On-trade (private imports) has become a focus area for growth, as we have more power to invest in brand promotion, tastings, etc. However, doing business here is very straightforward. The LCBO will tell you how much wine they will take, when, and how they will pay – and always follow through. But I should add that you can have excellent sales one year and zero the next, sometimes based on trivial details. Toronto continues to dominate the consumption of imported brands, although I have seen some effort in the last two to three years to change this, [such as the] opening [of] more LCBO stores across the province. Overall, Ontario can be both the most stable and unstable market. Producers can go from 30,000 bottles of a single wine in a general listing to zero the next year. Also be aware of promotion/investment, mainly in the bigger listings, and do not bite off more than you can chew in terms of investment. If sales here do not go according to predictions, all costs for promotion and return of goods will fall back on the producer.

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